Metro Brands reported 15% revenue growth (in line), aided by strong store additions. Revenue productivity declined 8% due to the pent-up demand base. However, gross margin remained intact owing to a high contribution from products with ASP of over INR3k and improvement in CBL gross margin. EBITDA grew 2%, while PAT declined 12% (8% above estimates). In the near term, we see risk of growth moderation, potential losses in Fila, and moderation in margins. This, along with a rebase in discounting and third-party sales, could impact margins. But, in the long term, healthy store economics and steady store adds in Fila should drive 19%/17% CAGR in revenue/PAT over FY23-25E. We reiterate our BUY rating on the stock.
OutlookSuperior store economics and a strong runway of growth should allow Metro to garner rich valuations going ahead. We increase the valuation multiple of the stock to 65x FY25E EPS (earlier 55x) to arrive at a TP of INR1,200. We reiterate our BUY rating on the stock.
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